Young adult apparel retailer Tilly’s (NYSE:TLYS) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 14.9% year on year to $147.3 million. Next quarter’s revenue guidance of $108 million underwhelmed, coming in 9.5% below analysts’ estimates. Its GAAP loss of $0.45 per share was 52.5% below analysts’ consensus estimates.
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Tilly's (TLYS) Q4 CY2024 Highlights:
- Revenue: $147.3 million vs analyst estimates of $159.9 million (14.9% year-on-year decline, 7.9% miss)
- EPS (GAAP): -$0.45 vs analyst expectations of -$0.30 (52.5% miss)
- Adjusted EBITDA: -$8.91 million vs analyst estimates of -$9.64 million (-6% margin, 7.6% beat)
- Revenue Guidance for Q1 CY2025 is $108 million at the midpoint, below analyst estimates of $119.4 million
- EPS (GAAP) guidance for the upcoming financial year 2025 is -$0.63 at the midpoint, beating analyst estimates by 3.1%
- Operating Margin: -9.6%, down from -4.5% in the same quarter last year
- Free Cash Flow was -$5.36 million, down from $310,000 in the same quarter last year
- Locations: 240 at quarter end, down from 248 in the same quarter last year
- Same-Store Sales fell 9.8% year on year (-8.8% in the same quarter last year)
- Market Capitalization: $107.9 million
Company Overview
With an emphasis on skate and surf culture, Tilly’s (NYSE:TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.
Apparel Retailer
Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $569.5 million in revenue over the past 12 months, Tilly's is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.
As you can see below, Tilly’s revenue declined by 1.7% per year over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as it didn’t open many new stores and observed lower sales at existing, established locations.
This quarter, Tilly's missed Wall Street’s estimates and reported a rather uninspiring 14.9% year-on-year revenue decline, generating $147.3 million of revenue. Company management is currently guiding for a 6.8% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 6.2% over the next 12 months, an acceleration versus the last five years. This projection is healthy and suggests its newer products will catalyze better top-line performance.
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Store Performance
Number of Stores
A retailer’s store count often determines how much revenue it can generate.
Tilly's listed 240 locations in the latest quarter and has kept its store count flat over the last two years while other consumer retail businesses have opted for growth.
When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Tilly’s demand has been shrinking over the last two years as its same-store sales have averaged 8.6% annual declines. This performance isn’t ideal, and we’d be concerned if Tilly's starts opening new stores to artificially boost revenue growth.
In the latest quarter, Tilly’s same-store sales fell by 9.8% year on year. This decrease represents a further deceleration from its historical levels. We hope the business can get back on track.
Key Takeaways from Tilly’s Q4 Results
We were impressed by how significantly Tilly's blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed significantly. Overall, this quarter could have been better. The stock traded up 1.2% to $3.30 immediately following the results.
Is Tilly's an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.